1987 (5) TMI 47 - AT - Income Tax

Summary

Issues:
1. Penalty imposed under section 271(1)(c) of the IT Act for the assessment year 1976-77.
2. Validity of cancellation of penalty by the ld. CIT(A) regarding two specific additions in the assessment.

Analysis:

Issue 1: Penalty Imposed under Section 271(1)(c) of the IT Act
1.1. The assessee firm filed a declaration under the Voluntary Disclosure of Income and Wealth Ordinance, 1975, disclosing an income of Rs. 1,10,000. However, the firm paid only a part of the tax payable on the disclosed income and did not receive a certificate from the CIT under the VDIW Act.
1.2. The ITO levied a penalty under section 271(1)(c) of the IT Act based on the non-compliance with the VDIW Act and lack of evidence for a credit entry of Rs. 10,800.
1.3. The ld. CIT(A) cancelled the penalty, citing that the assessee had provided a plausible explanation for the credit entry and had a bona fide belief that the disclosed income was not taxable for the assessment year 1976-77.

Issue 2: Validity of Cancellation of Penalty by the ld. CIT(A)
2.1. The ld. CIT(A) considered the Tribunal's observations in the quantum appeal and concluded that the explanation provided by the assessee for the credit entry of Rs. 10,800 was acceptable, as the partners had the financial capacity to make the credited amounts.
2.2. Regarding the addition of Rs. 1,10,000 claimed to be disclosed under the VDIW Act, the ld. CIT(A) relied on a previous case and found that the penalty was not justified as the assessee had acted in good faith and the income disclosure was not concealed deliberately.
2.3. The Tribunal upheld the ld. CIT(A)'s decision, emphasizing that the assessee's belief in the non-taxability of the disclosed income was reasonable, and the explanation provided for the credit entry was satisfactory.

Conclusion:
The Tribunal dismissed the Revenue's appeal, affirming the cancellation of the penalty by the ld. CIT(A) for both the additions in question. The Tribunal found that the assessee had acted in good faith and provided reasonable explanations for the disputed entries, leading to the penalty being deemed unjustified. The decision in this case would also apply to related appeals concerning similar issues.